Oct. 18 — The ongoing struggle against the racist, undemocratic emergency manager regime in Detroit and its filing of Chapter 9 municipal bankruptcy is intensifying. City employees, retirees, residents and activists are coming together to say “No” to the looting of their city by the big banks and the emergency manager and to the bankruptcy process that benefits these looters.

A mass outcry forced James Bonsall, the chief financial officer for city of Detroit Emergency Manager Kevyn Orr, to resign his position on Oct. 15. The outcry followed revelations of racist treatment toward Cheryl Johnson, an African-American city employee demoted in apparent retaliation for whistleblowing on the racist and sexist work environment she and others endured.

When discussing his participation in a city anti-crime neighborhood campaign, Bonsall once asked in a meeting if he “could shoot someone in a hoodie” if he participated. He said this in apparent reference to the racist murder of Black youth Trayvon Martin.

On top of this vile racism, the people of Detroit face attacks to city services, workers’ benefits and retirees’ pensions. The Detroit Institute of Arts and other city assets have been threatened as part of a massive shift of wealth to the banks and away from the city and its residents. To administer this shift, Orr has already given away more than $62 million of the people’s funds in “consulting” fees to high-priced lawyers and financial “experts.”

Fueled by these outrages, demonstrators massed in front of the federal courthouse in downtown Detroit the morning of Oct. 15. That was when U.S. Bankruptcy Court Judge Steven Rhodes began a hearing on the city’s eligibility for the bankruptcy process.

Inside, people’s anti-bank attorneys Jerome Goldberg and Vanessa Fluker addressed the court regarding possible fraud and other illegalities on the part of the banks. These possibilities must be investigated before a bankruptcy can be allowed to proceed.

Fluker asserted that Emergency Manager Orr was under a legal duty to investigate criminal activity that contributed to the financial crisis. She and Goldberg challenged how bankruptcy could proceed based on Orr’s refusal to investigate United Bank of Switzerland and Bank of America, the banks that have cost the city hundreds of millions of dollars.

Orr not only won’t investigate the banks, but he is seeking approval from the Detroit City Council for a $350-million, short-term loan out of which $250 million is to pay Bank of America and UBS termination fees on interest rate swaps. This gargantuan sum is on top of the over $250 million UBS and Bank of America have already netted on these swaps based on the city paying them hedging derivatives amounting to 6.3 percent interest on bonds where the actual interest was only 0.5 percent to 1 percent.

Oct. 23 protest: ‘Make the banks pay!’

The loan Orr wants, which must be paid back in no longer than three years, is secured by a first lien on the city’s casino tax dollars, a second lien on income tax revenues and a lien on all other city assets worth more than $10 million if the other liens are insufficient. The bank paid to service the loan is Barclays, which earlier admitted to fraudulent conduct in the LIBOR scandal. Incredibly, this short-term loan is tied to the LIBOR index.

Emergency Manager Orr negotiated a deal with the banks to keep the interest rate swaps out of the bankruptcy proceeding, instead of challenging the swaps as potentially fraudulent instruments within the bankruptcy and arguing that the swaps should be liquidated.

Bank of America and UBS are both clients of the Ohio-based Jones Day law firm. Jones Day is Orr’s former employer and currently provides the legal team for the emergency manager regarding the bankruptcy.

Both Bank of America and UBS have faced numerous investigations and even criminal convictions for their conduct in the municipal bond market. Besides, they are also two of the most notorious subprime mortgage lenders. These lenders’ practices caused over 100,000 Detroit home foreclosures in a five-year period.

In an Oct. 17 statement, the Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shutoffs wrote, “No wonder that rather than go after these banks, [Orr] is trying to award them this sweetheart deal.”

Activists have called for a demonstration outside the Coleman A. Young Municipal Center, 2 Woodward Avenue, at 1 p.m. on Oct. 21 prior to the City Council vote on the $350 million short-term loan. The demonstrators plan to go inside and attend the 2 p.m. Council meeting to demand the Council members reject this giveaway to the banks.

A coalition of forces, including Moratorium NOW!, Detroiters Resisting Emergency Management and American Federation of State, County and Municipal Employees Council 25 have called a major demonstration on Oct. 23 to “surround the federal courthouse” as Judge Rhodes begins the bankruptcy eligibility trial.

Protesters will demand “Stop the looting of Detroit” and “Defend city services, assets and pensions,” as well as an end to racist, undemocratic emergency management and the city bankruptcy. Moratorium NOW! is calling for an immediate cancellation of all debt payments to the banks, which have destroyed the city’s communities, and for the banks to pay for the rebuilding of Detroit.

ISDA Master Agreement

The ISDA master agreement is the most commonly used master contract for OTC derivative transactions internationally. It is used to govern many of the financial transactions between the City of Detroit and Wall Street. Below are links to the agreement and sites with explanations.